What Happened?
A number of stocks jumped in the afternoon session after a softened tone from President Donald Trump on U.S.-China relations boosted investor sentiment. The positive shift followed a weekend post on Truth Social where Trump stated, "Don't worry about China, it will all be fine!" and expressed a desire to help rather than hurt the country's economy. This statement provided significant relief to markets that had ended the prior week with steep losses. In response, the Nasdaq Composite jumped 2.2%, the S&P 500 gained 1.6%, and the Dow Jones Industrial Average closed 1.3% higher, as investors' fears of escalating trade tensions subsided.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Aerospace company Rocket Lab (NASDAQ: RKLB) jumped 2.6%. Is now the time to buy Rocket Lab? Access our full analysis report here, it’s free for active Edge members.
- Renewable Energy company SolarEdge (NASDAQ: SEDG) jumped 4.8%. Is now the time to buy SolarEdge? Access our full analysis report here, it’s free for active Edge members.
- Custom Parts Manufacturing company Stratasys (NASDAQ: SSYS) jumped 4.9%. Is now the time to buy Stratasys? Access our full analysis report here, it’s free for active Edge members.
- Electrical Systems company Powell (NASDAQ: POWL) jumped 5%. Is now the time to buy Powell? Access our full analysis report here, it’s free for active Edge members.
- HVAC and Water Systems company AAON (NASDAQ: AAON) jumped 2.5%. Is now the time to buy AAON? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Powell (POWL)
Powell’s shares are extremely volatile and have had 43 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago when the stock gained 4.6% on the news that investors scooped up equities, shaking off the initial concerns inferred from the Fed's dot plot, with tech stocks leading the charge.
As a reminder, the Federal Reserve cut its benchmark interest rate by 25 basis points the previous day and signaled that more reductions could come before year-end and beyond. Initially when the cut was announced and Fed Chair Powell held his press conference, there was a pullback in the market as the Fed's "dot plot" revealed that only one cut was likely for 2026. This was below the three cuts that had been priced into the markets. This was the first interest rate cut of 2025, a move investors had widely anticipated. In response to the decision, stocks rose significantly, positioning major indexes like the S&P 500 and Nasdaq to open at record levels.
The Fed's decision was influenced by signs of a weakening labor market. Lower interest rates are generally seen as positive for stocks because they reduce borrowing costs for businesses and make fixed-income investments like bonds less attractive by comparison, driving capital into the equity market. While Fed Chair Powell noted the path forward has risks, the prospect of looser monetary policy has fueled optimism on Wall Street.
Powell is up 39.9% since the beginning of the year, but at $320 per share, it is still trading 9.2% below its 52-week high of $352.37 from November 2024. Investors who bought $1,000 worth of Powell’s shares 5 years ago would now be looking at an investment worth $12,638.
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